Correlation Between Sun Art and INDOFOOD AGRI

Can any of the company-specific risk be diversified away by investing in both Sun Art and INDOFOOD AGRI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sun Art and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Art Retail and INDOFOOD AGRI RES, you can compare the effects of market volatilities on Sun Art and INDOFOOD AGRI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sun Art with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Art and INDOFOOD AGRI.

Diversification Opportunities for Sun Art and INDOFOOD AGRI

0.04

Correlation Coefficient

Sun Art  INDOFOOD AGRI

Significant diversification

The 3 months correlation between Sun and INDOFOOD is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sun Art Retail and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and Sun Art is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sun Art Retail are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of Sun Art i.e., Sun Art and INDOFOOD AGRI go up and down completely randomly.

Pair Corralation between Sun Art and INDOFOOD AGRI

Assuming the 90 days horizon Sun Art Retail is expected to generate 6.49 times more return on investment than INDOFOOD AGRI. However, Sun Art is 6.49 times more volatile than INDOFOOD AGRI RES. It trades about 0.1 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about -0.06 per unit of risk. If you would invest  14.00  in Sun Art Retail on December 20, 2024 and sell it today you would earn a total of  8.00  from holding Sun Art Retail or generate 57.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Sun Art Retail  vs.  INDOFOOD AGRI RES

Sun Art Retail

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Art Retail are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sun Art reported solid returns over the last few months and may actually be approaching a breakup point.

INDOFOOD AGRI RES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDOFOOD AGRI RES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sun Art and INDOFOOD AGRI

The main advantage of trading using opposite Sun Art and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Art position performs unexpectedly, INDOFOOD AGRI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.

The idea behind Sun Art Retail and INDOFOOD AGRI RES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.